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Quarterly report with a continuing view of a company's financial position

10-Q

May 14, 2018

SECURITIES
AND EXCHANGE COMMISSION

WASHINGTON,
D.C. 20549

FORM
10-Q

☑
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For
the quarterly period ended: March 31, 2018

OR

☐
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For
the transition period from ________________ to __________________

Commission
File Number 000-1321002

AGRITEK
HOLDINGS, INC.

(Exact
name of registrant as specified in its charter)

Delaware

20-8484256

(State or other jurisdiction
of incorporation or organization)

(I.R.S. Employer
Identification No.)

777
Brickell Avenue, Suite 500, Miami, FL 33131

(Address
of principal executive offices)

(305)
721-2727

(Registrant's
telephone number, including area code)

Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No
☐

Indicate
by check mark whether the registrant is a larger accelerated filer, an accelerated filer, or a non-accelerated filer. See definition
of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one)

Large
accelerated filer ☐

Accelerated
filer ☐

Non-accelerated
filer ☐

(Do
not check if a smaller reporting company)

Smaller
reporting company ☑

If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Sectionn13(a) of the Exchange Act. ☐

Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes☐ No ☑

The
number of shares outstanding of the Registrant's $0.0001 par value Common Stock as of May 15, 2018, was 784,121,399 shares.

AGRITEK
HOLDINGS, INC.

FORM
10-Q

Quarterly
Period Ended March 31, 2018

INDEX

FORWARD-LOOKING STATEMENTS

Page

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

Condensed Consolidated Balance Sheets at March
31, 2018 (Unaudited) and December 31, 2017

2

Condensed Consolidated Statements of Operations
for the three months ended March 31, 2018 and 2017 (Unaudited)

3

Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 2018 and 2017 (Unaudited)

4

Notes to Condensed Financial Statements (Unaudited)

5

Item 2.

Management’s Discussion and Analysis of
Financial Condition and Results of Operations

20

Item 3.

Quantitative and Qualitative Disclosures about
Market Risks

27

Item 4.

Controls and Procedures

27

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities and
Use of Proceeds

28

Item 3.

Defaults Upon Senior Securities

29

Item 4.

Mine Safety Disclosures

29

Item 5.

Other Information

29

Item 6.

Exhibits

30

SIGNATURES

32

FORWARD-LOOKING
STATEMENTS

This
quarterly report on Form 10-Q contains forward-looking statements regarding our business, financial condition, results of operations
and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,”
“seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking
statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this
quarterly report on Form 10-Q. Additionally, statements concerning future matters are forward-looking statements.

Although
forward-looking statements in this quarterly report on Form 10-Q reflect the good faith judgment of our management, such statements
can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject
to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or
anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes
include, without limitation, those specifically addressed in “Risk Factors” and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for the fiscal year ended
December 31, 2017, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
in this quarterly report on Form 10-Q and in other reports that we file with the Securities and Exchange Commission (the “SEC”).
You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this quarterly
report on Form 10-Q.

We
file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements,
and other information regarding issuers that file electronically with the SEC, including us. You can also read and copy any materials
we file with, or furnish to, the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can
obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

We
undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that
may arise after the date of this quarterly report on Form 10-Q, except as required by law. Readers are urged to carefully review
and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested
parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

AGRITEK
HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED
CONSOLIDATED BALANCE SHEETS

March
31,

December
31,

2018

2017

ASSETS

Current
Assets:

Cash
and cash equivalents

$

201,350

$

304,889

Marketable
Securities

24,236

41,862

Inventory,
net

19,992

10,000

Prepaid
assets and other

58,000

48,500

Total
current assets

303,578

405,251

Notes
receivable

245,000

210,000

Property
and equipment, net of accumulated depreciation of $32,254 (2018) and $23,824 (2017)

Professional
and consulting fees, includes stock-based compensation $97,500 (2018) and $166,831 (2017)

234,380

270,986

Gain
on recapture of reserve for land

—

(47,502

)

Rent
and other occupancy costs

9,053

21,679

Leased
property expense

16,000

9,561

Other
general and administrative expenses

144,340

39,512

Total
operating expenses

460,165

646,935

Operating
loss

(467,653

)

(646,935

)

Other
Income (Expense):

Loss
on debt settlement

(58,759

)

—

Loss
on legal matter

(232,246

)

—

Interest
expense

(228,511

)

(333,242

)

Derivative
liability expense

2,857,244

218,178

Total
other income (expense), net

2,337,728

(115,064

)

Net
income (loss)

$

1,870,075

$

(761,999

)

Unrealized
loss on marketable securities

(17,626

)

(14,432

)

Net
comprehensive income (loss)

$

1,852,449

$

(776,431

)

Basic
income (loss) per share

$

0.00

$

(0.00

)

Diluted
income (loss) per share

$

0.00

$

(0.00

)

Weighted
average number of common shares outstanding

Basic

754,359,212

427,965,019

Diluted

963,411,093

427,965,019

See
notes to condensed consolidated financial statements.

3

AGRITEK
HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS

Three
Months Ended Ended

March
31,

2018

2017

Cash
flow from operating activities:

Net
income (loss)

$

1,870,075

$

(761,999

)

Adjustments
to reconcile net income (loss) to net cash used in operating activities:

Stock
based compensation

97,500

466,831

Amortization
of deferred financing costs

20,000

22,100

Loss
on legal settlement

232,246

—

Loss
on debt settlement

58,759

Depreciation

8,430

1,646

Initial
expense for fair value of derivative liabilities

44,206

349,934

Amortization
of discounts on convertible notes

183,450

289,979

Change
in fair values of derivative liabilities

(2,901,355

)

(568,112

)

Recapture
of reserve for land

—

(47,502

)

Changes
in operating assets and liabilities:

Increase
in :

Inventory

(9,992

)

—

Prepaid
assets and other

(9,500

)

(9,000

)

Security
deposit

—

(3,000

)

Increase
(decrease) in:

Accounts
payable and accrued expenses

(47,022

)

46,116

Due
to related party

(7,715

)

5,527

Deferred
rent

—

6,854

Net
cash used in operating activities

(460,918

)

(200,626

)

Cash
flows from investing activities:

Purchase
of property, equipment and furniture

(19,563

)

(51,413

)

Purchase
of notes receivable

(35,000

)

—

Net
cash used in investing activities

(54,563

)

(51,413

)

Cash
flows from financing activities:

Proceeds
from issuance of convertible debt

275,000

425,900

Payments
made of principal and interest on convertible notes

(178,058

)

—

Payments
made on note payable

(25,000

)

—

Proceeds
from sale of common stock to be issued

340,000

—

Net
cash provided by financing activities

411,942

425,900

Net
increase (decrease) in cash and cash equivalents

(103,539

)

173,860

Cash
and cash equivalents, Beginning

304,889

67,260

Cash
and cash equivalents, Ending

$

201,350

$

241,120

Supplemental
disclosure of cash flow information:

Cash
paid for interest

$

6,859

$

—

Cash
paid for income taxes

$

—

$

—

Schedule
of non-cash financing activities:

Discount
from derivatives

$

295,000

$

425,900

Conversion
of notes payable and interest into common stock

$

125,000

$

191,386

Change
in fair value for available for sale marketable securities

$

(17,626

)

$

(14,432

)

Issuance
of note payable as part of land acquisition

$

—

$

35,000

Settlement
of derivatives

$

660,568

$

513,280

Stock
issued for settlement of accounts payable

$

—

$

37,784

Cashless
warrant exercise

$

2,855

$

—

See notes
to condensed consolidated financial statements.

4

AGRITEK
HOLDINGS, INC. AND SUBSIDIARIES

Notes
to Condensed Consolidated Financial Statements

March
31, 2018 and 2017

Note
1 - Organization

Business

Agritek
Holdings Inc. (“the Company” or “Agritek Holdings”) and
its wholly-owned subsidiaries, MediSwipe, Inc. (“MediSwipe”), Prohibition Products Inc., and Agritek Venture Holdings,
Inc. (“AVHI”) is a fully integrated, active investor and operator in the legal
cannabis sector. Specifically, Agritek Holdings provides strategic capital and functional expertise to accelerate the commercialization
of its diversified portfolio of holdings. Currently, the Company is focused on three high-value segments of the cannabis market,
including real estate investment, intellectual property brands; and infrastructure, with operations in three U.S. States, Colorado,
Washington State, California as well as Canada and Puerto Rico. Agritek Holdings invests its capital via real estate holdings,
licensing agreements, royalties and equity in acquisition operations.

We
provide key business services to the legal cannabis sector including:

•

Funding
and Financing Solutions for Agricultural Land and Properties zoned for the regulated Cannabis Industry.

•

Dispensary and Retail
Solutions

•

Commercial Production
and Equipment Build Out Solutions

•

Multichannel Supply
Chain Solutions

•

Branding, Marketing
and Sales Solutions of proprietary product lines

•

Consumer
Product Solutions

The
Company intends to bring its’ array of services to each new state that legalizes the use of cannabis according to appropriate
state and federal laws. Our primary objective is acquiring commercial properties to be utilized in the commercial marijuana industry
as cultivation facilities in compliance with state laws. This is an essential aspect of our overall growth strategy because once
acquired and re-zoned, the value of such real property is substantially higher than under the previous zoning and use.

Once
properties are identified and acquired to be used for purposes related to the commercial marijuana industry as provided for by
state law, and we plan to create vertical channels within that legal jurisdiction including equipment financing, payment processing
and marketing of exclusive brands and services to retail dispensaries

Agritek’s
business focus is primarily to hold, develop and manage real property. The Company shall also provide oversight on every property
that is part of its portfolio. This can include complete architectural design and subsequent build-outs, general support, landscaping,
general up-keep, and state of the art security systems. At this time, Agritek does not grow, process, own, handle, transport,
or sell marijuana as the Company is organized and directed to operate strictly in accordance with all applicable state and federal
laws. As the legal environment changes in Colorado, California and other states, the Company’s management may explore business
opportunities that involve ownership interests in dispensaries and growing operations if and when such business opportunities
become legally permissible under applicable state and federal laws.

Note
2 – Summary of Significant Accounting Policies

Basis
of Presentation and Principles of Consolidation

The
accompanying consolidated financial statements are prepared in accordance with Generally Accepted Accounting Principles in the
United States of America ("US GAAP"). The consolidated financial statements of the Company include
the consolidated accounts of Agritek and its’ wholly owned subsidiaries MediSwipe, AVHI, The American Hemp Trading Company,
Inc., a Colorado Corporation (dba 77Acres, Inc.) and PPI. PPI, a Florida corporation, was originally formed on July 1, 2013 as
The American Hemp Trading Company, Inc. (“HempFL”) and on August 27, 2014, HempFL changed its’ name to PPI.
All intercompany accounts and transactions have been eliminated in consolidation.

5

Cash
and Cash Equivalents

The
Company considers all highly liquid investments with an original term of three months or less to be cash equivalents.

Accounts
Receivable

The
Company records accounts receivable from amounts due from its customers upon the shipment of products. The allowance for losses
is established through a provision for losses charged to expenses. Receivables are charged against the allowance for losses when
management believes collectability is unlikely. The allowance is an amount that management believes will be adequate to absorb
estimated losses on existing receivables, based on evaluation of the collectability of the accounts and prior loss experience.
While management uses the best information available to make its evaluations, this estimate is susceptible to significant change
in the near term. As of March 31, 2018, and December 31, 2017, based on the above criteria, the Company has a full allowance for
doubtful accounts of $43,408.

Inventory

Inventory
is valued at the lower of cost or market value. Cost is determined using the first in first out (FIFO) method. Provision for potentially
obsolete or slow-moving inventory is made based on management analysis or inventory levels and future sales forecasts.

Notes
receivable

March
31, 2018

December
31, 2017

Client
1

$

130,000

$

110,000

Client
2

115,000

100,000

Total

$

245,000

$

210,000

•

Note
receivable from Client 1 is pursuant to a five (5) year operational and exclusive licensing
agreement with a third party who leases a 25,000-sq. ft. approved cultivation facility
located in San Juan, Puerto Rico (see Note 10).

•

Note
receivable from Client 2 is pursuant to a five (5) year operational and exclusive licensing
agreement with a third party who leases a 10,000-sq. ft. approved cultivation facility
located in Washington State (see Note 10).

Deferred
Financing Costs

The
costs related to the issuance of debt are capitalized and amortized to interest expense using the straight-line method through
the maturities of the related debt.

Derivative
Financial Instruments

The
Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates
all of it financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain
features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the
derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the
fair value reported as charges or credits to income.

For
option-based simple derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative
instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such
instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

Debt
Issue Costs and Debt Discount

The
Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These
costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense over the life
of the debt. If a conversion of the underlying debt occurs prior to maturity a proportionate share of the unamortized amounts
is immediately expensed.

6

Original
Issue Discount

For
certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The original issue discount
would be recorded to debt discount, reducing the initial carrying value of the note and is amortized to interest expense through
the maturity of the debt. If a conversion of the underlying debt occurs prior to maturity a proportionate share of the unamortized
amounts is immediately expensed.

Marketable
Securities and Other Comprehensive Income

The
Company classifies its marketable securities as available-for-sale securities, which are carried at their fair value based on
the quoted market prices of the securities with unrealized gains and losses, net of deferred income taxes, reported as accumulated
other comprehensive income (loss), a separate component of stockholders’ equity. Realized gains and losses on available-for-sale
securities are included in net earnings in the period earned or incurred.

Property
and Equipment

Property
and equipment are stated at cost, and except for land, depreciation is provided by use of a straight-line method over the estimated
useful lives of the assets. The Company reviews property and equipment for potential impairment whenever events or changes in
circumstances indicate that the carrying amounts of assets may not be recoverable. In February, 2017, the Company entered into
a land purchase contract to acquire approximately 80 acres including water and mineral rights. The total cost of the land was
$129,555. The Company paid $41,554 at closing and issued a note payable for $88,000. The Company is on the deed of trust of the
property with a remaining note balance of $26,500 and $51,500 due the seller as of March 31, 2018 and December 31, 2017, respectively.
The estimated useful lives of property and equipment are as follows:

Furniture and equipment

5
years

Manufacturing equipment

7 years

The
Company's property and equipment consisted of the following at March 31, 2018, and December 31, 2017:

March
31, 2018

December
31, 2017

Furniture
and equipment

$

200,247

$

180,684

Land

129,555

129.555

Accumulated
depreciation

(32,254

)

(23,824

)

Balance

$

297,548

$

286,415

Depreciation
expense of $8,430 and $1,646 was recorded for the three months ended March 31, 2018, and 2017, respectively.

Long-Lived
Assets

Long-lived
assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not
be recoverable.

Deferred
rent

The
Company calculates the total cost of the lease for the entire lease period and divides that amount by the number of months of
the lease. The result is the average monthly expense and is charged to rent expense with the offset to deferred rent, irrespective
of the actual amount paid. The amounts paid are charged to the deferred rent account.As
of March 31, 2018, and December 31, 2017, the Company has a balance of $24,916 in deferred rent which is included in the consolidated
balance sheet.

7

Revenue
Recognition

The
Company recognizes revenue in accordance with FASB ASC 605, Revenue Recognition. ASC 605 requires that four basic criteria are
met: (1) persuasive evidence of an arrangement exists, (2) delivery of products and services has occurred, (3) the fee is fixed
or determinable and (4) collectability is reasonably assured. The Company recognizes revenue during the month in which products
are shipped or fees are earned.

Fair
Value of Financial Instruments

The
Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance
on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability,
as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that
market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes
a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation
techniques, are assigned a hierarchical level.

The
following are the hierarchical levels of inputs to measure fair value:

Level
2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar
assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities;
or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

•

Level
3 - Unobservable inputs reflecting the Company's assumptions incorporated in valuation techniques used to determine fair value.
These assumptions are required to be consistent with market participant assumptions that are reasonably available.

The
carrying amounts of the Company's financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts
payable and accrued expenses, certain notes payable and notes payable - related party, approximate their fair values because of
the short maturity of these instruments.

The
following table represents the Company’s financial instruments that are measured at fair value on a recurring basis as of
March 31, 2018, and December 31, 2017, for each fair value hierarchy level:

March 31, 2018

Derivative Liabilities

Total

Level I

$

—

$

—

Level II

$

—

$

—

Level III

$

2,194,113

$

2,194,113

December 31, 2017

Level I

$

—

$

—

Level II

$

—

$

—

Level III

$

5,416,830

$

5,416,830

Income
Taxes

The
Company accounts for income taxes in accordance with ASC 740-10, Income Taxes. Deferred tax assets and liabilities are recognized
to reflect the estimated future tax effects, calculated at the tax rate expected to be in effect at the time of realization. A
valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some portion of the deferred
tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and
rates of the date of enactment.

8

ASC
740-10 prescribes a recognition threshold that a tax position is required to meet before being recognized in the financial statements
and provides guidance on recognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure
and transition issues. Interest and penalties are classified as a component of interest and other expenses. To date, the Company
has not been assessed, nor paid, any interest or penalties.

Uncertain
tax positions are measured and recorded by establishing a threshold for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. Only tax positions meeting the more-likely-than-not recognition
threshold at the effective date may be recognized or continue to be recognized. The Company’s tax years subsequent to 2005
remain subject to examination by federal and state tax jurisdictions.

Earnings
(Loss) Per Share

Earnings
(loss) per share are computed in accordance with ASC 260, "Earnings per Share". Basic earnings (loss) per share is computed
by dividing net income (loss), after deducting preferred stock dividends accumulated during the period, by the weighted-average
number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income
by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities,
if any, outstanding during the period. As of March 31, 2018, there were warrants and options to purchase 45,094,763 shares of
common stock and the Company’s outstanding convertible debt is convertible into approximately 163,957,118 shares of common
stock. These amounts are included in the computation of dilutive net income per share.

Accounting
for Stock-Based Compensation

The
Company accounts for stock awards issued to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees.
The measurement date is the earlier of (1) the date at which a commitment for performance by the counterparty to earn the equity
instruments is reached, or (2) the date at which the counterparty's performance is complete. Stock awards granted to non-employees
are valued at their respective measurement dates based on the trading price of the Company’s common stock and recognized
as expense during the period in which services are provided. For the three months ended March 31, 2018, and 2017, the Company
recorded stock- based compensation of $97,500 and $466,831, respectively (See Note 9).

Use
of Estimates

The
preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount
of revenues and expenses during the reported period. Actual results could differ from those estimates.

Advertising

The
Company records advertising costs as incurred. For the three months ending March 31, 2018, and 2017, advertising expenses was
$17,450 and $3,059, respectively.

Note
3 – Recent Accounting Pronouncements

In
February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
2016-02, “Leases (Topic 842)”. Under this guidance, an entity is required to recognize right-of-use assets and
lease liabilities on its balance sheet and disclose key information about leasing arrangements. This guidance offers specific
accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative
and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing
and uncertainty of cash flows arising from leases. This guidance is effective for annual reporting periods beginning after December
15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption
permitted. The Company is currently evaluating the impact of the adoption of this standard will have on our consolidated financial
statements.

9

In
March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based
Payment Accounting”. The standard is intended to simplify several areas of accounting for share-based compensation arrangements,
including the income tax impact, classification on the statement of cash flows and forfeitures. ASU 2016-09 is effective for fiscal
years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. The Company
elected to early adopt the new guidance in the second quarter of fiscal year 2016 which requires us to reflect any adjustments
as of January 1, 2016, the beginning of the annual period that includes the interim period of adoption. The primary impact
of adoption was the recognition of additional stock compensation expense and paid-in capital for all periods in fiscal year 2016. Additional
amendments to the recognition of excess tax benefits, accounting for income taxes and minimum statutory withholding tax requirements
had no impact to retained earnings as of January 1, 2016, where the cumulative effect of these changes is required
to be recorded. We have elected to account for forfeitures as they occur to determine the amount of compensation cost to be recognized
in each period.

In
November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230).” ASU No. 2016-18 requires that
restricted cash be included with cash and cash equivalents when reconciling the change in cash flow. This guidance is reflected
in these financial statements.

In
January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which removes the second step of
the two-step goodwill impairment test. Under ASU 2017-04, an entity will apply a one-step quantitative test and record the amount
of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value, not to exceed the total
amount of goodwill allocated to the reporting unit. ASU 2017-04 does not amend the optional qualitative assessment of goodwill
impairment. Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount
of the reporting unit when measuring the goodwill impairment loss, if applicable. ASU 2017-04 is effective for annual or any interim
goodwill impairment tests in fiscal years beginning after December 15, 2019; early adoption is permitted for interim or annual
goodwill impairment tests performed on testing dates after January 1, 2017. The Company has not elected early adoption of this
standard and is currently in the process of evaluating the impact of adopting ASU 2017-04 and cannot currently estimate the financial
statement impact of adoption.

In
May 2017, the FASB issued ASU No. 2017-09, “Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting.”
The amendments in this update provide guidance about which changes to the terms or conditions of a share-based award require an
entity to apply modification accounting in Topic 718. The guidance will be effective for the Company for its fiscal year
2018, with early adoption permitted. The Company does not expect this ASU to materially impact the Company’s consolidated
financial statements.

Accounting
standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a
future date are not expected to have a material impact on the consolidated financial statements upon adoption.

Note
4 – Marketable Securities

The
Company owns marketable securities (common stock) as of March 31, 2018, and December 31, 2017 is outlined below:

March 31,

2018

December 31,

2017

Beginning balance

$

41,862

$

39,769

Unrealized gain (loss) marked to fair value

(17,626

)

2,093

Ending balance

$

24,236

$

41,862

800
Commerce, Inc. (now known as Petrogress, Inc), was a commonly controlled entity until February 29, 2016, owed Agritek $282,947
as of February 29, 2016, as a result of advances received from or payments made by Agritek on behalf of 800 Commerce. These advances
were non-interest bearing and were due on demand. Effective February 29, 2016, the Company received 1,102,462 shares of common
stock of Petrogress, Inc. as settlement of the $282,947 owed to the Company. The market value on the date the Company received
the shares of common stock was $16,525.

10

Note
5 – Prepaid Expenses

Prepaid
expenses consisted of the following at March 31, 2018 and December 31, 2017:

March 31,

2018

December 31,

2017

Vendor deposits

$

46,000

$

46,000

Investor relations

12,000

2,500

Total prepaid expenses

$

58,000

$

48,500

Note
6 – Concentration of Credit Risk

Cash

Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of cash. The Company maintains cash balances at one financial institution,
which is insured by the Federal Deposit Insurance Corporation (“FDIC”). The FDIC insured institution insures
up to $250,000 on account balances.

Note
7 – Note Payable

Note
Payable Land

On March 18, 2014, in conjunction with the land purchase of 80 acres in Pueblo County, Colorado, the Company
paid $36,000 cash and entered into a promissory note in the amount of $85,750. In November 2015, the Company was made aware that
the land transaction regarding 80 acres in Pueblo County, Colorado, may not have been properly deeded to the Company. The
company was a party to the land purchase, however, the second party to the land contract never filed the original quit claim deed
on behalf of the Company, even though a copy of the notarized quit claim deed was sent to the Company. In February, 2017, the
original owner of the 80 acres foreclosed on the property from the second party and the Company entered into a new land purchase
contract (including water and mineral rights) directly with the landowner on February 7, 2017. The Company is on the deed of trust
of the property and as March 31, 2018, and December 31, 2017, the note balance is $26,500 and $51,500, respectively.

Note
8 – Convertible Debt

2016
Convertible Notes

On
October 31, 2016, the Company entered into a Convertible Promissory Note ("St. George 2016 Notes") for $555,000 to St.
George Investments, LLC. (“St. George”) which included a purchase price of $500,000 and transaction costs of $5,000
and OID interest of $50,000. On October 31, 2016, the Company received $100,000 and recorded $115,000 as convertible note payable,
including $5,000 of transaction costs and $10,000 OID interest. St. George also issued to the Company eight secured promissory
notes, each in the amount of $50,000. All or any portion of the outstanding balance of the St. George 2016 Notes may be prepaid,
without penalty, along with accrued but unpaid interest at any time prior to maturity. The Company has no obligation to pay St.
George any amounts on the unfunded portion of the St. George 2016 Notes. The St. George 2016 Note bears interest at 10% per annum
(increases to 22% per annum upon an event of default) and is convertible into shares of the Company’s common stock at St.
George’s option at a price of $0.05 per share. On December 14, 2016, St. George funded one of the secured promissory notes
issued to the Company. During the year ended December 31, 2017, St. George funded the remaining secured promissory notes issued
to the Company. During the three ended March 31, 2018, the Company issued 22,163,120 shares of common stock upon the conversion
of $116,282 of principal and $8,718 accrued and unpaid interest on the note. The shares were issued at approximately $0.00564
per share. The principal and interest balance of the note as of March 31, 2018, and December 31, 2017, was $196,962 and $313,244,
respectively.

11

Beginning
on the date that is six (6) months after the later of (i) the Issuance Date, and (ii) the date the Initial Cash Purchase Price
is paid to the Company (the “Initial Installment Date”), and on each applicable Installment Date thereafter, the Company
is to pay the Holder, the applicable Installment Amount due on such date. Five Installment Amounts of $111,000 plus the sum of
any accrued and unpaid interest, fees, costs or charges may be made (a) in cash (a “Company Redemption”), (b) by converting
such Installment Amount into shares of Common Stock (a “Company Conversion”), or (c) by any combination of a Company
Conversion and a Company Redemption so long as the entire amount of such Installment Amount due shall be converted and/or redeemed
by the Company on the applicable Installment Date. The St. George 2016 Note matures fifteen months after the Issuance Date.

2017
Convertible Notes

On
January 24, 2017, the Company completed the closing of a private placement financing transaction with Cerberus, pursuant to a
Securities Purchase Agreement (the “Cerberus Purchase Agreement”). Pursuant to the Cerberus Purchase Agreement, Cerberus
purchased an 8% Convertible Debenture (the “Cerberus Debenture”) in the aggregate principal amount of $63,000, and
delivered on January 25, 2017, gross proceeds of $60,000 excluding transaction costs, fees, and expenses. During the three months
ended March 31, 2017, the Company recorded a debt discount of $60,000 and recorded amortization expense of $10,833. As of March
31, 2018, and December 31, 2017, the note was paid in full. Also, on January 24, 2017, the Company issued to Cerberus, a back-end
note under the same terms and conditions, in the amount of $63,000. On June 30, 2017, the back-end note was funded upon receipt
of $60,000, excluding transaction costs, fees, and expenses. During the three months ended March 31, 2018, the Company redeemed
the back- end note. The principal and interest balance of the back-end note as of March 31, 2018, and December 31, 2017 was $-0-
and $63,000, respectively.

On
February 1, 2017, the Company completed the closing of a private placement financing transaction with Power Up Lending Group,
LTD (“Power Up”), pursuant to a Securities Purchase Agreement (the “Power Up Purchase Agreement”). Pursuant
to the Power Up Purchase Agreement, Power Up purchased an 12% Convertible Debenture (the “Power Up Debenture”) in
the aggregate principal amount of $140,000, and delivered on February 3, 2017 (the “Funding Date”), gross proceeds
of $136,500 excluding transaction costs, fees, and expenses. Principal and interest on the Power Up Debentures is due and payable
on November 5, 2017, and the Power Up Debenture is convertible into shares of the Company’s common stock beginning six months
from the Funding Date, at a VCP. The VCP is calculated as the average of the three (3) lowest closing bid price during the ten
(10) trading days immediately prior to the conversion date multiplied by fifty eight percent (58%), representing a forty two percent
(42%) discount. During the year ended December 31, 2017, the Company recorded a debt discount of $136,500 and during the year
ended December 31, 2017, recorded amortization expense of $136,500. The Company may prepay the Power Up Debenture, subject to
prior notice to the holder within an initial 30-day period after issuance, by paying an amount equal to 120% multiplied by the
amount that the Company is prepaying. For each additional 30-day period the amount being prepaid is multiplied by an additional
5%, up to a maximum of 140% on the 180th day from issuance. Beginning on the 180th day after the issuance
of the Debentures, the Company is not permitted to prepay the Debenture, so long as the Debenture is still outstanding, unless
the Company and the holder agree otherwise in writing. On June 23, 2017, the Company accepted and agreed to Assignment Agreements
(‘AA”), whereby, Power Up assigned $70,000 of their note to LG, and $70,000 of their note to Cerberus. As part of
the AA, the Company agreed to pay Power Up $65,000. The Company issued an 8% Replacement Note to LG for $73,198 (the “First
Power Up Replacement Note”), and an 8% Replacement Note to Cerberus for $73,198 (the “Second Power Up Replacement
Note”) The First and Second Power Up Replacement Notes are due June 23, 2018 and are convertible into shares of the Company’s
common stock at any time at the discretion of LG and Cerberus, respectively, at a VCP. The VCP is calculated as the lowest trading
price during the eighteen (18) trading days immediately prior to the conversion date multiplied by fifty eight percent (58%),
representing a forty two percent (42%) discount. During the year ended December 31, 2017, the Company issued 12,721,391 shares
of common stock upon the conversion of $73,198 of principal and $967 accrued and unpaid interest on the First Power Up Replacement
Note. The shares were issued at approximately $0.00583 per share. The principal balance of the First Power Up Replacement Note
as of December 31, 2017 was $-0-. During the three months ended March 31, 2018, the Company redeemed the back- end note. The principal
and interest balance of the Second Power Up Replacement Note as of December 31, 2017 was $-0- and $73,199 respectively.

12

On
February 24, 2017, the Company completed the closing of a private placement financing transaction with Cerberus, pursuant to a
Securities Purchase Agreement (the “Cerberus Purchase Agreement”). Pursuant to the Cerberus Purchase Agreement, Cerberus
purchased an 8% Convertible Debenture (the “Cerberus Debenture”) in the aggregate principal amount of $17,500, and
delivered on February 27, 2017, gross proceeds of $16,000 excluding transaction costs, fees, and expenses. During the three months
ended March 31, 2018, the Company redeemed the note. The principal and interest balance of the note as of March 31, 2018, and
December 31, 2017 was $-0- and $17,500, respectively. Also, on February 24, 2017, the Company issued to Cerberus, a back-end note
under the same terms and conditions, in the amount of $17,500. On December 7, 2017, the back-end note was funded upon receipt
of $16,000, excluding transaction costs, fees, and expenses. -. During the three months ended March 31, 2018, the Company redeemed
the back- end note The principal and interest balance of the back-end note as of March 31, 2018 and December 31, 2017 was $-0-
and $17,500, respectively.

On
December 20, 2017, the Company entered into a Convertible Promissory Note ("St. George 2017 Notes") for $1,105,000 to
St. George which includes a purchase price of $1,000,000 and transaction costs of $5,000 and OID interest of $100,000. On December
21, 2017, the Company received $200,000 and recorded $225,000 as convertible note payable, including $5,000 of transaction costs
and $20,000 OID interest. St. George also issued to the Company four secured promissory notes, each in the amount of $200,000.
All or any portion of the outstanding balance of the St. George 2017 Notes may be prepaid, without penalty, along with accrued
but unpaid interest at any time prior to maturity. The Company has no obligation to pay St. George any amounts on the unfunded
portion of the St. George 2017 Notes. The St. George 2017 Note bears interest at 10% per annum (increases to 22% per annum upon
an event of default) and is convertible into shares of the Company’s common stock at St. George’s option at a price
of $0.05 per share. On December 27, 2017, St. George funded $250,000 of the secured promissory notes issued to the Company, and
the Company recorded $270,000 as convertible note payable, including $20,000 OID interest. During the year ended December 31,
2017, the Company recorded debt discounts of $450,000. On January 9, 2018, and March 20, 2018, St. George funded $200,000 and
$75,000, respectively, of the secured promissory notes issued to the Company, and the Company recorded $295,000 as convertible
note payable, including $20,000 OID interest. The principal and interest balance of the St George 2017 Note as of March 31, 2018
and December 31, 2017, was $790,000 and $495,000 respectively.

Principal
and interest on the 2017 LG and Cerberus Debentures above is due and payable one year from their respective funding date, and
the LG and Cerberus Debentures are convertible into shares of the Company’s common stock at any time at the discretion of
LG and Cerberus, respectively, at a VCP. The VCP is calculated as the lowest trading price during the eighteen (18) trading days
immediately prior to the conversion date multiplied by fifty eight percent (58%), representing a forty two percent (42%) discount.

The
Company may prepay the 2017 LG and/or the Cerberus Debentures, subject to prior notice to the holder within an initial 30-day
period after issuance, by paying an amount equal to 118% multiplied by the amount that the Company is prepaying. For each additional
30-day period the amount being prepaid is multiplied by an additional 6%, up to a maximum of 148% on the 180th day
from issuance. Beginning on the 180th day after the issuance of the Debentures, the Company is not permitted to
prepay the Debenture, so long as the Debenture is still outstanding, unless the Company and the holder agree otherwise in writing.

The
Company determined that the conversion feature of the 2017 Convertible Notes represent an embedded derivative since the Notes
are convertible into a variable number of shares upon conversion. Accordingly, the 2017 Convertible Notes were not considered
to be conventional debt under ASC 815-40 (formerly EITF 00-19, Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company’s Own Stock) and the embedded conversion feature was bifurcated from the debt host and
accounted for as a derivative liability. Accordingly, the fair value of these derivative instruments being recorded as a liability
on the consolidated balance sheet with the corresponding amount recorded as a discount to each Note. Such discount is being amortized
from the date of issuance to the maturity dates of the Notes. The change in the fair value of the liability for derivative contracts
are recorded in other income or expenses in the consolidated statements of operations at the end of each quarter, with the offset
to the derivative liability on the balance sheet. The embedded feature included in the 2017 Convertible Notes that were funded
in 2018, resulted in an initial debt discount of $295,000, an initial derivative liability expense of $44,206 and an initial derivative
liability of $339,206. During the three months ended March 3, 2018, the Company recorded amortization expense on the debt discounts
of $132,618, and there remains $605,743 of unamortized debt discount as of March 31, 2018.

13

Convertible
Note Conversions

During
the three months ended March 31, 2018, the Company issued the following shares of common stock upon the conversions of portions
of the Convertible Notes:

Date

Principal Conversion

Interest Conversion

Total Conversion

Conversion Price

Shares Issued

Issued to

2/12/18

$

69,221

$

5,779

$

75,000

$

0.00564

13,297,872

St Georges

3/27/18

$

47,061

$

2,939

$

50,000

$

0.00564

8,865,248

St Georges

$

116,282

$

8,718

$

125,000

22,163,120

A
summary of the convertible notes payable balance as of March 31, 2018, and December 31, 2017, is as follows:

2018

2017

Beginning Principal Balance

$

979,443

826,480

Convertible notes-newly issued

295,000

1,813,210

Conversion of convertible notes (principal)

(116,282

)

(1,350,247

)

Principal payments

(171,199

)

(310,000

)

Unamortized discount

(605,743

)

(494,193

)

Ending Principal Balance, net

$

381,219

485,260

The
Company recorded a loss on debt settlement of $58,759 on the redemption of convertible notes for the three months ended March
31, 2018.

Note
9 - Derivative liabilities

As
of March 31, 2018, the Company revalued the embedded conversion feature of the Convertible Notes, and warrants (see note 9). The
fair values were calculated based on the Monte Carlo simulation method consistent with the terms of the related debt.

A
summary of the derivative liability balance as of March 31, 2018, is as follows:

Notes

Warrants

Total

Beginning Balance

$

3,608,345

$

1,808,485

$

5,416,830

Initial Derivative Liability

339,206

—

339,206

Fair Value Change

(1,902,885

)

(998,470

)

(2,901,355

)

Reclassified to Additional paid- in capital

(369,823

)

(76,676

)

(446,499

)

Reduction for debt extinguishment

(214,069

)

—

(214,069

)

Ending Balance

$

1,460,774

$

733,339

$

2,194,113

The
credit to derivative expense for the three months ended March 31, 2018, of $2,857,244 is comprised of the initial derivative expense
of $44,111 resulting from the issuances of new convertible notes in the period and the fair value change decreasing the liability
and expense by $2,901,355. For the three months ended March 31, 2017, there was a credit to derivative expense of $218,178, comprised
of $349,934 of initial derivative expense resulting form new convertible notes issued during the three months ended March 31,
2017, and the change, decreasing the liability and expense by $568,112.

The
fair value at the commitment date for the 2018 Convertible Notes and the re-measurement dates for the Company’s derivative
liabilities were based upon the following management assumptions as of March 31, 2018:

Commitment
date

Remeasurement
date

Expected
dividends

-0-

-0-

Expected
volatility

147%-152%

148%-162%

Expected
term

12-14 months

6-12 months

Risk
free interest

1.83%-2.08%

1.58%-2.09%

14

There
were no new warrants issued for the three months ended March 31, 2018. The Company evaluated all outstanding warrants to determine
whether these instruments may be tainted. All warrants outstanding were considered tainted. The Company valued the embedded derivatives
within the warrants using the Black-Scholes valuation model. The fair value for Warrant #’s 1-9 were based upon
the following management assumptions:

Remeasurement date

Expected dividends

-0-

Expected volatility

256%

Expected term

3.59 years

Risk free interest

2.44%

Note
10 – Related Party Transactions

Effective
January 1, 2013, the Company agreed to an annual compensation of $150,000 for its CEO, Mr. Michael Friedman (resigned March 20,
2015, re-appointed November 4, 2015). Effective March 20, 2015, Mr. Justin Braune was named CEO and President. Mr. Braune also
was appointed to the Board of Directors. The Company agreed to an annual compensation of $100,000 for Mr. Braune in his role of
CEO and Director of the Company and to issue Mr. Braune 15,000,000 shares of restricted common stock. Mr. Braune resigned from
the board of directors and as CEO on November 4, 2015, and agreed to cancel the 15,000,000 shares in his letter of resignation.
The Company also initially issued Mr. Braune 12,500,000 shares of common stock on October 13, 2015. On October 16, 2015, Mr. Braune
advised the Company’s transfer agent at the time to cancel the shares.

For
the three months ended March 31, 2018 and 2017, the Company recorded expenses of $37,500 to the CEO, included in Management Fees
in the condensed consolidated statements of operations, included herein. As of March 31, 2018, and December 31, 2017, the Company
owed the CEO $-0- and $7,715, respectively, and is included in due to related party on the Company’s consolidated balance
sheet. On January 30, 2017, the Company issued 10,000,000 shares of common stock to the Company’s CEO. The shares were issued
for services performed as the sole Officer and director of the Company since November 2014. The shares were valued at $301,000
($0.0301 per share, the market price of the common stock on the grant date) and are included in Management Fees in the consolidated
statements of operations, included herein.

On
October 5, 2017, the Company agreed to lease from the Company’s CEO, a "420 Style" resort and estate property
approximately one hour outside of Quebec City, Canada. The fifteen-acre estate consists of nine (9) unique guest suites, horse
stables, and is within walking distance to a public golf course. A separate structure will serve as a small grow facility run
by patient employees and caretakers on the property which may be toured by guests of the facility. Pursuant to the agreement,
the Company will pay $8,000 per month in exchange for the Company being entitled to all rents and income generated from the property.
For the three months ended March 31, 2018, the Company paid and recorded $16,000 of expense, included in leased property expense,
related party in the condensed consolidated statements of operations, included herein. The Company will be responsible for all
costs of the property, including, but not limited to, renovations, repairs and maintenance, insurance and utilities. For the three
months ended March 31, 2018, the Company has incurred $25,000 of renovation expense. On August 8, 2017, the Company issued 5,000,000
shares of common stock to the seller. The Company valued the shares at $0.0123 per share (the market price of the common stock)
and has included $61,500 in stock- based compensation expense for the year ended December 31, 2017.

Note
11 – Common and Preferred Stock

Common
Stock

2018
Issuances

Date

Principal Conversion

Interest Conversion

Total Conversion

Conversion Price

Shares Issued

Issued to

2/12/18

$

69,221

$

5,779

$

75,000

$

0.00564

13,297,872

St Georges

3/27/18

$

47,061

$

2,939

$

50,000

$

0.00564

8,865,248

St Georges

$

116,282

$

8,718

$

125,000

22,163,120

15

In
addition to the above, during the three months ended March 31, 2018, the Company:

On
February 26, 2018, the Company agreed to issue 5,000,000 shares of common stock to Dr. Stephen Holt, for his appointment to the
advisory board. The Company recorded an expense of $97,500 (based on the market price of
the Company’s common stock of $0.0195 per share) and is included in professional and consulting fees in the condensed consolidated
statements of operations for the three months ended March 31, 2018.

Issued
28,551,579 shares of common stock to St. George pursuant to Notices of Exercise of Warrant received. The shares were issued based
upon the cashless exercise provision of the warrant. The Company recorded the shares at their par value of $0.0001, with the offset
to additional-paid-in-capital.

Common
stock to be issued

During
the three months ended March 31, 2018, the Company reduced the shares of common stock to be issued previously recorded in fiscal
year ended December 31, 2017, by 23,202,587 shares. The adjustment was a result of the terms of the SPA, whereby the purchase
price of the common stock to be issued is based on 90% of the closing share price 6 months after the SPA. St. George and the Company
have agreed to amend the SPA, whereby, the purchase price is 90% of the closing price of the common stock, the day preceding any
SPA. During the three months ended March 31, 2018, the Company received $340,000, pursuant to Stock Purchase Agreements (the “SPA”)
with St. George to buy 15,515,543 shares of common stock. As of March 31, 2018, and December 31, 2017, shares of common stock
to be issued are 44,887,291 and 52,574,335, respectively.

Preferred
Stock

On
June 26, 2015, the Company filed with the Delaware Secretary of State the Amended and Restated Designation Preferences and Rights
(the “Certificate of Designation”) of Class B Preferred Stock (the “Series B Preferred Stock”). Pursuant
to the Certificate of Designation, 1,000 shares constitute the Series B Preferred Stock. The Series B Preferred Stock and any
accrued and unpaid dividends thereon shall, with respect to rights on liquidation, winding up and dissolution, rank senior to
the Company’s issued and outstanding common stock and Series A preferred stock.

The
SeriesB Preferred Stockhas the
right to vote in aggregate, on all shareholder matters equal to 51% of the total vote, no matter how many shares of common stock
or other voting stock of the Company are issued or outstanding in the future.The Series
B Preferred Stock has a right to vote on all matters presented or submitted to the Company’s stockholders for approval in
pari passu with the common stockholders, and not as a separate class. The holders of Series B Preferred Stock have the right to
cast votes for each share of Series B Preferred Stock held of record on all matters submitted to a vote of common stockholders,
including the election of directors. There is no right to cumulative voting in the election of directors. The holders of Series
B Preferred Stock vote together with all other classes and series of common stock of the Company as a single class on all actions
to be taken by the common stockholders except to the extent that voting as a separate class or series is required by law. As of
March 31, 2018, and December 31, 2017, there were 1,000 shares of Class B Preferred Stock outstanding.

Warrants
and Options

On
April 14, 2015, in connection with the appointment of Dr. Stephen Holt to the advisory board, the Company agreed the advisor shall
receive a non-qualified stock option to purchase 1,000,000 shares (“Option Shares”) of the Company’s common
stock at an exercise price equal to $0.05 per share and expiring April 14, 2018. Option Shares of 400,000 vested immediately and
50,000 Option Shares vested each month from April 2015 through March 2016. Accordingly, as of March 31, 2016, 1,000,000 Option
Shares have vested and the Company recorded $2,317 as stock compensation expense for the year ended December 31, 2016, based on
Black-Scholes.

16

On
October 31, 2016, the Company granted (Warrant #1) to St. George the right to purchase at any time on or after November 10, 2016
(the “Issue Date”) until the date which is the last calendar day of the month in which the fifth anniversary of the
Issue Date occurs (the “Expiration Date”), a number of fully paid and non-assessable shares (the “Warrant Shares”)
of Company’s common stock, equal to $57,500 divided by the Market Price (defined below) as of the Issue Date, as such number
may be adjusted from time to time pursuant to the terms and conditions of Warrant #1 to Purchase Shares of Common Stock. The Market
Price is equal to the lowest intra-day trade price in the twenty (20) Trading Days immediately preceding the applicable date of
exercise, multiplied by sixty percent (60%). The exercise price is the lower of $0.05 and is subject to price adjustments pursuant
to the agreement and includes a cashless exercise provision. The Company also issued Warrant #’s 2-9, with each warrant
only effective upon St. George funding of the secured notes they issued to the Company. Warrant #’s 2-9 give St. George
the right to purchase Warrant Shares equal to $27,500 divided by the Market Price on the funded date. On December 14, 2016, the
Company received a payment of $50,000, and accordingly, Warrant #2 became effective. During the year ended December 31, 2017,
the Company received the funding on the remaining notes and Warrant #’s 3-9 became effective. During the three months ended
March 31, 2018, the company issued 28,551,579 shares of common stock to St. George pursuant to Notices of Exercise of 3,040,629
Warrants received. The shares were issued based upon the cashless exercise provision of the warrant.

The following table summarizes the activity related to warrants of the Company for the years ended December 31, 2017 and 2016:

Number of Warrants

Weighted-Average Exercise Price per share

Weighted-Average Remaining Life (Years)

Outstanding and exercisable at December 31, 2016

17,926,130

$

0.0811

4.88

Warrant issued

40,573,870

0.00564

—

Warrants exercised

(9,364,108

)

0.00564

—

Outstanding and exercisable at December 31, 2017

49,135,892

0.00654

4.17

Warrants exercised

(3,040,629

)

0.00564

—

Outstanding and exercisable March 31, 2018

46,095,623

$

0.0066

3.92

Note
12 – Income Taxes

The
Company accounts for income taxes under standards issued by the FASB. Under those standards, deferred tax assets and liabilities
are recognized for future tax benefits or consequences attributable to temporary differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered
or settled. A valuation allowance is provided for significant deferred tax assets when it is more likely than not that such
assets will not be realized through future operations.

No
provision for federal income taxes has been recorded due to the available net operating loss carry forwards of approximately $8,524,193
will expire in various years through 2032. Future tax benefits which may arise as a result of these losses have not been recognized
in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded
a valuation allowance for the future tax loss carry forwards.

17

The
actual income tax provisions differ from the expected amounts calculated by applying the statutory income tax rate to the Company's
loss before income taxes. The components of these differences are as follows at March 31, 2018 and December 31, 2017:

2018

2017

Net tax loss carry-forwards

$

8,524,193

$

7,878,733

Statutory rate

37.6

%

37.6

%

Expected tax recovery

3,205,097

2,962,404

Change in valuation allowance

(3,205,097

)

(2,962,404

)

Income tax provision

$

—

$

—

Components of deferred tax asset:

Non capital tax loss carry forwards

$

3,205,097

$

2,962,404

Less: valuation allowance

(3,205,097

)

(2,962,404

)

Net deferred tax asset

$

—

$

—

Note
13 – Commitments and Contingencies

Office
Space

In
April 2014, the Company entered into a two-year sublease agreement for the use of up to 7,500 square feet with a Colorado
based oncology clinical trial and drug testing company and facility presently doing cancer research and testing for
established pharmaceutical companies seeking FDA approval for new drugs. Pursuant to the lease, as amended, the
Company agreed to pay $3,500 per month for the space. The lease expired in April 2016, and the Company owes the landlord
$48,750.

In
January 2017, the Company signed a five (5) year lease, beginning February 1, 2107, for approximately 6,000 square feet of office
space, comprised of two floors, in San Juan, Puerto Rico. Pursuant to the lease, the Company will pay $3,000 per month for the
third floor of the building for the first year of the lease. The rent will increase 3% per year on February beginning in 2018
and an additional 3% per year on each successive February 1, during the term of the lease. The landlord has agreed that for the
month of February 2017, the rent will be $1,500. The rent for second floor of the building will be $2,000 per month during the
term of the lease and the Company does not have any rent payments for the first three months of the lease (February 2017 through
April 2017). Through September 30, 2017, the Company calculated the total amount of the rent for the term lease and recorded straight
line rent expense of $45,417 and had made payments of $20,516. As of March 31, 2018 and December 31, 2017, the Company has a balance
of $24,916 in deferred rent which is included in the consolidated balance sheet. The leases for the second and third floor were
cancelled in September 2017 as a result of Hurricane Irma.

Rent
expense was $9,053 and $21,679 for the three months ended March 31 2018, and 2017, respectively.

Leased
Properties

On
April 28, 2014, the Company executed and closed a ten-year lease agreement for 20 acres of an agricultural farming facility located
in South Florida following the approval of the so-called “Charlotte’s Web” legislation, aimed at decriminalizing
low grade marijuana specifically for the use of treating epilepsy and cancer patients. Pursuant to the lease agreement,
the Company maintains a first right of refusal to purchase the property for three years. The Company has recorded $38,244 of expense
(included in leased property expenses) for the years ended December 31, 2017, and 2016, respectively. The
Company is currently in default of the lease agreement, as rents have not been for the second year of the lease beginning May
2015.

18

On
July 11, 2014, the Company signed a ten-year lease agreement for an additional 40 acres
in Pueblo, Colorado. The lease requires monthly rent payments of $10,000 during the first year and is subject to a 2% annual increase
over the life of the lease. The lease also provides rights to 50 acres of certain tenant water rights for $50,000 annually plus
cost of approximately $2,400 annually. The Company paid the $50,000 in July 2014, and has not used the property and any water
and has not paid for any water rights after September 30, 2015. The Company has not recorded any expense for the three months
ended March 31, 2018, and 2017. The Company is currently in default of the lease agreement, as rents have not been paid since
February 2015.

Agreements

On
April 5, 2017, the Company executed a five (5) year operational and exclusive licensing agreement with a third party who leases
a 25,000-sq. ft. approved cultivation facility located in San Juan, Puerto Rico. The Company will be the exclusive funding source,
and supervise all infrastructure buildout, equipment lease/finance, security systems and personnel and provide access of seasoned
Colorado and California cultivation crews to ensure the facility meets all standard operating procedures as set forth by the Department
Of Health of Puerto Rico. Under the agreement, the Company receives $12,000 a month in consulting fees, licensing fees on all
vaporizer and edible sales, equipment and lighting rental and financing fees along with equity interest in the property. As of
March 31, 2018, and December 31, 2017, the Company has invested $130,000 and $110,000, respectively.

On
August 7, 2017, the Company signed a LOI with Green Acres, whereby in consideration of consulting fees, licensing fees on all
vaporizer and edible brands, equipment and lighting rental and financing fees, the Company will provide up to $250,000 of working
capital and potentially, up to $3,500,000 for the buyout of Green Acres existing mortgage on their Washington State facility.
As of March 31, 2018, and December 31, 2017, the Company has invested $115,000 and $100,000, respectively.

On
October 5, 2017, the Company agreed to lease from the Company’s CEO, a "420 Style" resort and estate property
approximately one hour outside of Quebec City, Canada. The fifteen-acre estate consists of nine (9) guest suites, horse stables,
and is within walking distance to a public golf course. A separate structure will serve as a small grow facility run by patient
employees and caretakers on the property which may be toured by guests of the facility. Pursuant to the agreement, the Company
will pay $8,000 per month in exchange for the Company being entitled to all rents and income generated from the property. For
the three months ended March 31, 2018, the Company paid and recorded $16,000 of expense, included in leased property expense,
related party in the condensed consolidated statements of operations, included herein. The Company will be responsible for all
costs of the property, including, but not limited to, renovations, repairs and maintenance, insurance and utilities. For the three
months ended March 31, 2018, the Company has incurred $25,000 of renovation expense.

Legal
& Other

On
March 2, 2015, the Company, the Company’s CEO and the Company’s CFO at the time were named in a civil
complaint filed by Erick Rodriguez in the District Court in Clark County, Nevada (the “DCCC”). The complaint
alleges that Mr. Rodriguez never received 250,000 shares of Series B preferred stock that were initially approved by the
Board of Directors in 2012, subject to the completion of a merger of a company controlled by Mr. Rodriguez. Since the merger
was never completed, the shares were never certificated to Mr. Rodriguez. On March 21, 2017, the DCC agreed to Set Aside the
Entry of Default against the Defendants. Mr. Rodriguez resigned in June 2013. On April 12, 2018, an Arbitrator issued a
final award to Rodriguez in the amount of $399,291. The Company and the Company’s counsel believe the Arbitrator denied
a number of detailed objections to the award, which cited clear mistakes as to Nevada law and to the facts. The
Company recorded a loss on legal matter, included in other expenses for the year ended December 31, 2017. On May 3, 2018,
the Arbitrator issued an amended final award of $631,537, inclusive of interest and legal fees. The Company recorded a loss
of $232,246 on the legal matter, included in other expenses for the three months ended March 31, 2018. The Company has
retained a Nevada attorney who is an expert in fighting attempts to convert arbitration awards into judgments in Nevada
courts, to work with our arbitration counsel. A hearing is scheduled on June 12, 2018 in District Court in Clark
County Nevada to confirm or reject the award. The Company will vigorously defend any adverse ruling including appeals to the
Nevada Supreme Court.

19

On
May 6, 2016, the Company, B. Michael Freidman and Barry Hollander (former CFO) were named as defendants in a Summons/Complaint
filed by Justin Braune (the “Plaintiff”) in Palm Beach County Civil Court, Florida (the “PBCCC”). The
complaint alleges that Mr. Braune was entitled to shares of common stock of the Company. On December 5, 2016, the PBCCC set aside
a court default that had been previously issued. The defendants have answered the complaint, including the defenses that Mr. Braune
advised the Company’s transfer agent and the Company in his letter of resignation dated November 4, 2015, clearly stating
that he has relinquished all shares of common stock. The Company has filed a counterclaim suit against the Plaintiff, as well
as sanctions against the Plaintiff and their counsel.

Note
14 – Going Concern

The
accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern.
As of March 31, 2018, the Company had an accumulated deficit of $23,708,002 and working capital deficit of $3,643,315, inclusive
of a derivative liability of $2,194,113. These conditions raise substantial doubt about the Company's ability to continue as a
going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of
this uncertainty.

Note
15 – Subsequent Events

On
April 19, 2018, the Company issued 4,875,887 shares of common stock upon the conversion of $27,500 of principal and interest.
The shares were issued at $0.00564 per share.

The
Company previously issued 5,000,000 shares of common stock for security on renovations of the Company’s Canada bed
and breakfast management agreement. The Company has since paid in excess of $50,000 towards renovations. Mr. Johnston will
now retain the shares under an amended agreement in exchange for legal fees, tax and license applications, and as a
financial custodian over the renovation account as a Canadian resident. The 5,000,000 shares will be in exchange for 12
months of services.

20

Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The
following is management’s discussion and analysis of certain significant factors that have affected our financial position
and operating results during the periods included in the accompanying consolidated financial statements, as well as information
relating to the plans of our current management. This report includes forward-looking statements. Generally, the words “believes,”
“anticipates,” “may,” “will,” “should,” “expect,” “intend,”
“estimate,” “continue,” and similar expressions or the negative thereof or comparable terminology are
intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, including the
matters set forth in this report or other reports or documents we file with the Securities and Exchange Commission from time to
time, which could cause actual results or outcomes to differ materially from those projected. Undue reliance should not be placed
on these forward-looking statements which speak only as of the date hereof. We undertake no obligation to update these forward-looking
statements.

The
following discussion and analysis of our financial condition and results of operations should be read in conjunction with the
financial statements and notes thereto for the three months ended March 31, 2018 and 2017.

The
independent auditor’s reports on our financial statements for the years ended December 31, 2017 and 2016 includes a “going
concern” explanatory paragraph that describes substantial doubt about our ability to continue as a going concern. Management’s
plans in regard to the factors prompting the explanatory paragraph are discussed below and also in Note 14 to the unaudited condensed
consolidated financial statements.

While
our financial statements are presented on the basis that we are a going concern, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business over a reasonable length of time, our auditor has raised
substantial doubt about our ability to continue as a going concern.

Results
of Operations

For
the three months ended March 31, 2018 compared to the three months ended March 31, 2017

Revenues

Revenues
for the three months ended March 31, 2018 and 2017 were $20 and $-0- and consisted of wholesale goods.

Cost
of Sales

For
the three months ended March 31, 2018, cost of sales of $7,508 is comprised of consulting fees, including an allocation of $7,500,
or twenty (20%) percent of the Company’s CEO fees.

Operating
Expenses

Operating
expenses were $460,165 and $646,935 for the three months ended March 31, 2018 and 2017, respectively. The expenses were comprised
of:

Three months ended March 31,

Description

2018

2017

Management fees

$

34,792

$

337,500

Administration fees

21,600

15,200

Gain on recapture of reserve on land

—

(47,502

)

Professional and consulting fees

234,380

270,986

Rent and occupancy costs

9,053

21,679

Property and maintenance cost

16,000

9,561

General and other administrative

144,340

39,512

Total

$

460,165

$

646,935

21

Administration
and management fees includes $30,000 and $37,500 expensed as fees for our CEO for the three months ended March 31, 2018 and 2017,
respectively. Also included were fees paid for administration services of $21,600 and $15,200 for the three months ended March
31, 2018 and 2017, respectively. The Company has agreed to compensation of $12,500 per month for the Company’s CEO and estimates
that administration fees will be approximately $7,600 per month at this time. Also included in the three months ended March 31,
2017 was stock compensation expense of $300,000, comprised of the Company issuing 10,000,000 shares of common stock to the Company’s
CEO. The shares were issued for services performed as the sole Officer and director of the Company since November 2014. The Company
valued the shares at $0.03 per share (the market price of the common stock) and recorded stock compensation expense, management,
of $300,000.

Professional
and consulting fees decreased to $234,830 for the three months ended March 31, 2018, from $270,986 for the three months ended
March 31, 2017, and is comprised of the following:

Three months ended March 31,

2018

2017

Legal fees

$

34,880

$

46,155

Consulting fees

71,500

16,000

Accounting and audit fees

10,500

29,500

Stock compensation expense

97,500

166,831

Investor relation costs, including related party of $5,000 (2018) and $12,500 (2017)

20,000

12,500

Total

$

234,380

$

270,986

Stock
compensation expense for the three months ended March 31, 2018, was a result of 5,000,000 shares of common stock issued to Dr.
Stephen Holt, for his appointment to the advisory board. The Company recorded an expense
of $97,500 (based on the market price of the Company’s common stock of $0.0195 per share).

Stock
compensation expense of $166,831 for the three months ended March 31, 2017, was comprised of:

On
January 16, 2017, the Company entered into a Business Consultant Agreement (the “BCA”). Pursuant to the BCA, the Company
issued 5,000,000 shares of common stock for services to be provided to the Company related to business development, product marketing,
helping identify mergers and acquisition candidates, and will consult with and advise the Company on matters pertaining to business
modeling and strategic alliances. The Company valued the shares at $0.03 per share (the market price of the common stock) and
recorded stock compensation expense of $150,000, and

On
January 30, 2017, the Company issued 1,000,000 shares of common stock to Venture Equity. The Company valued the shares at $0.03
per share (the market price of the common stock) and cancelled of $13,169 of accrued and unpaid fees owed Venture Equity and recorded
stock- based compensation expense of $16,831.

Rent
and occupancy costs were $9,053 and $21,679 for the three months ended March 31, 2018, and 2017, respectively. The decrease was
primarily due to in January 2017, the Company signed a five (5) year lease, beginning February
1, 2107, for approximately 6,000 square feet of office space, comprised of two floors, in San Juan, Puerto Rico. Pursuant to the
lease, the Company will pay $3,000 per month for one floor for the first year of the lease. The rent will increase 3% per year
on February beginning in 2018 and an additional 3% per year on each successive February 1, during the term of the lease. The landlord
has agreed that for the month of February 2017, the rent will be $1,500. The rent for the other floor will be $2,000 per month
during the term of the lease and the Company does not have any rent payments for the first three months of the lease (February
2017 through April 2017). The Company is straight lining the total lease payments over the term of the lease and for the three
months ended March 31, 2017 has included $11,354 of rent expense.

Leased
property available for sub-lease and property maintenance costs were $16,000 (related) and $9,561 for the three months ended March
31, 2018 and 2017, respectively. For the three months ended March 31, 2018, the Company made lease payments of $16,000 for their
lease with the Company’s CEO for, the "420 Style" resort and estate property approximately one hour outside of
Quebec City, Canada. The 2107 costs were comprised of leased real estate. On April 28, 2014, the Company executed and closed a
10 year lease agreement for 20 acres of an agricultural farming facility located in South Florida. Pursuant to the lease agreement,
the Company maintains a first right of refusal to purchase the property for three years. The Company has recorded $9,561 of expense
for the three months ended March 31, 2017.

22

General
and other administrative costs for the three months ended March 31, 2018, were $144,340, compared to $39,512, for the three months
ended March 31, 2017, respectively, consisting of public company expenses (transfer agent, filing fees and etc.), advertising,
travel, website development, payroll, office and other taxes.

Other
Income (Expense), Net

Other
income, net, for the three months ended March 31, 2018 was $2,337,728 compared to other expenses, net, of $115,064 for the three
months ended March 31, 2017, respectively. Other income, net, for the 2018 period was from the decrease on the fair value of derivatives
of $2,857,244, partially offset by the loss on debt settlement of $58,759, loss on legal matter of $232,246 and interest expense
of $228,511. Other expense for the 2017 period was from the decrease on the fair value of derivatives of $218,178 and interest
expense of $333,242.

Interest
expense for each of the periods is as follows:

Three months ended March 31,

2018

2017

Interest on face value

$

24,887

$

21,163

Amortization of note discount

183,450

289,979

Amortization of deferred financing fees

20,000

22,100

Other

174

—

Total

$

228,511

$

333,242

Capital
Resources and Liquidity

Liquidity
is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. As of March 31,
2018, we had cash and cash equivalents of $201,350, a decrease of $103,539, from $304,889 as of December 31, 2017. At March 31,
2018, we had current liabilities of $3,946,893 (including $2,194,113 of non-cash derivative liabilities) compared to current assets
of $303,578 which resulted in working capital deficit of $3,643,315. The current liabilities are comprised of accounts payable,
accrued expenses, convertible debt, derivative liabilities and notes payable.

Operating
Activities

For
the three months ended March 31, 2018, net cash used in operating activities was $460,918 compared to $200,626 for the three months
ended March 31, 2017.

The
Company had net income for the three months ended March 31, 2018 of $1,870,075 primarily attributable to a gain of $2,901,355
in the change of the fair value of derivative liabilities, partially offset by non-cash expenses of stock- based compensation
of $97,500, the initial derivative liability expense of $44,206 on new convertible notes issued and the amortization of discounts
and financing fees on convertible notes of $203,450, loss on debt settlement of $58,759 and loss on legal matter of $232,246.

The
Company had a net loss for the three months ended March 31, 2017 of $761,999 which included non-cash expenses of stock based compensation
of $466,831, the initial derivative liability expense of $349,934 on new convertible notes issued and the amortization of discounts
on convertible notes of $312,079, reduced by a gain on reversing a previous reserve on land acquired of $47,502 and for the decrease
in fair value of the derivative liability of $568,112. Changes in operating assets and liabilities that decreased cash used in
operating activities included an increase in accounts payable and accrued expenses of $46,116, related party payable of $5,527
and deferred rent of $6,854.

Investing
Activities

During
the three months ended March 31, 2018, net cash used in investing activities was $54,563 compared to $51,413 for the three months
ended March 31, 2017. For the period ending March 31, 2018, the Company purchased furniture and equipment of $19,563 and also
expended $35,000 to increasing the investment in note receivables related to two separate five- year exclusive licensing and operation
agreements. The 2017 period was the result of the Company paying $41,554 as part of the purchase price to acquire 80 acres in
Pueblo Colorado and $9,859 in furniture and equipment for the Puerto Rico offices.

23

Financing
Activities

Net
cash provided by financing activities was $411,942 and $425,900 for the three months ended March 31, 2018 and 2017, respectively.
The 2018 activity was comprised of proceeds received related to the issuance of convertible promissory notes of $275,000 and $340,000
related to Stock Purchase Agreements with St. George. The Company also made payments of $178,058 of principal and accrued interest
on convertible promissory notes and $25,000 on notes payable. The 2017 period was a result of proceeds from the issuance of convertible
promissory notes.

Off
Balance Sheet Arrangements

We
do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition or results of operations.

Going
Concern

The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern,
which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

As
reflected in the accompanying unaudited condensed consolidated financial statements, the Company had an accumulated deficit at
March 31, 2018, a net loss and net cash used in operating activities for the reporting period then ended. These conditions raise
substantial doubt about its ability to continue as a going concern.

The
Company is attempting to produce sufficient revenue; however, the Company’s cash position may not be sufficient to support
its daily operations. While the Company believes in the viability of its strategy to produce sufficient revenue and in its ability
to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern
is dependent upon its ability to further implement its business plan and generate sufficient revenues and in its ability to raise
additional funds.

The
unaudited consolidated financial statements do not include any adjustments related to the recoverability and classification of
recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to
continue as a going concern.

Critical
Accounting Policies

Accounting
Policies and Estimates

The
preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America
requires our management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Our management periodically evaluates the estimates and judgments made. Management bases
its estimates and judgments on historical experience and on various factors that are believed to be reasonable under the circumstances.
Actual results may differ from these estimates as a result of different assumptions or conditions.

Basis
of Presentation and Principles of Consolidation

The
accompanying condensed consolidated financial statements have been prepared by the Company without audit. In the opinion of management,
all adjustments necessary to present the financial position, results of operations and cash flows for the stated periods have
been made. Except as described below, these adjustments consist only of normal and recurring adjustments. Certain information
and note disclosures normally included in the Company’s annual financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated unaudited
financial statements should be read in conjunction with a reading of the Company’s consolidated financial statements and
notes thereto. Interim results of operations for the three months ended March 31, 2018, are not necessarily indicative of future
results for the full year. Certain amounts from the 2017 period have been reclassified to conform to the presentation used in
the current period.

24

The
condensed consolidated unaudited financial statements of the Company include the consolidated
accounts of Agritek and its wholly owned subsidiaries AVHI and Prohibition Products, Inc. (“PPI”). PPI, a Florida
corporation, was originally formed on July 1, 2013 as The American Hemp Trading Company, Inc. (“AHTC”) and on August
27, 2014, AHTC changed its name to PPI. All intercompany accounts and transactions have been eliminated in consolidation.

The
Company recognizes revenues when all of the following criteria are met: (1) persuasive evidence of an arrangement exists, (2)
delivery of products and services has occurred, (3) the fee is fixed or determinable and (4) collectability is reasonably assured.

Use
of Estimates

The
preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amount
of revenues and expenses during the reported period. Actual results could differ from those estimates.

Cash
and Cash Equivalents

The
Company considers all highly liquid investments with an original term of three months or less to be cash equivalents.

Accounts
Receivable

The
Company records accounts receivable from amounts due from its customers upon the shipment of products. The allowance for losses
is established through a provision for losses charged to expenses. Receivables are charged against the allowance for losses when
management believes collectibility is unlikely. The allowance is an amount that management believes will be adequate to absorb
estimated losses on existing receivables, based on evaluation of the collectability of the accounts and prior loss experience.
While management uses the best information available to make its evaluations, this estimate is susceptible to significant change
in the near term. As of March 31, 2018, and December 31, 2017, based on the above criteria, the Company has a full allowance for
doubtful accounts of $43,408.

Inventory

Inventory
is valued at the lower of cost or market value. Cost is determined using the first in first out (FIFO) method. Provision for potentially
obsolete or slow moving inventory is made based on management analysis or inventory levels and future sales forecasts.

Notes
receivable

As
of March 31, 2018, the Company has recorded notes receivable the following:

•

$130,000 pursuant
to a five (5) year operational and exclusive licensing agreement with a third party who leases a 25,000-sq. ft. approved cultivation
facility located in San Juan, Puerto Rico (see Note 10).

•

$115,000 pursuant
to a five (5) year operational and exclusive licensing agreement with a third party who leases a 10,000-sq. ft. approved cultivation
facility located in Washington State (see Note 10).

25

Impairment
of Long-Lived Assets and Long-Lived Assets to be Disposed

We
evaluate long-lived assets and identifiable intangible assets with finite useful lives in accordance with ASC 350-30 and ASC 360
(formerly SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets), and accordingly, management reviews our
long-lived assets and identifiable intangible assets with finite useful lives for impairment whenever events or changes in circumstances
indicate that the carrying amount of such assets may not be recoverable. We recognize an impairment loss when the sum of the future
undiscounted net cash flows expected to be realized from the asset is less than its carrying amount. If an asset is considered
to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its
fair value. Considerable judgment is necessary to estimate the fair value of the assets and accordingly, actual results could
vary significantly from such estimates. Our most significant estimates and judgments relating to the long-lived asset impairments
include the timing and amount of projected future cash flows.

Fair
Value of Financial Instruments

Fair
value measurements are determined under a three-level hierarchy for fair value measurements that prioritizes the inputs to valuation
techniques used to measure fair value, distinguishing between market participant assumptions developed based on market data obtained
from sources independent of the reporting entity (“observable inputs”) and the reporting entity’s own assumptions
about market participant assumptions developed based on the best information available in the circumstances (“unobservable
inputs”).

Fair
value is the price that would be received to sell an asset or would be paid to transfer a liability (i.e., the “exit price”)
in an orderly transaction between market participants at the measurement date. In determining fair value, the Company primarily
uses prices and other relevant information generated by market transactions involving identical or comparable assets (“market
approach”). The Company also considers the impact of a significant decrease in volume and level of activity for an asset
or liability when compared with normal activity to identify transactions that are not orderly.

The
highest priority is given to unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest
priority to unobservable inputs (Level 3 measurements). Securities are classified in their entirety based on the lowest level
of input that is significant to the fair value measurement.

The three
hierarchy levels are defined as follows:

Level 1 – Quoted
prices in active markets that is unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 – Quoted
prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in
active markets or financial instruments for which significant inputs are observable, either directly or indirectly;

Level 3 – Prices
or valuations that require inputs that are both significant to the fair value measurement and unobservable.

Credit
risk adjustments are applied to reflect the Company’s own credit risk when valuing all liabilities measured at fair value.
The methodology is consistent with that applied in developing counterparty credit risk adjustments, but incorporates the Company’s
own credit risk as observed in the credit default swap market.

The
Company's financial instruments consist primarily of cash, accounts receivable, notes receivable, accounts payable and accrued
expenses, note payable and convertible debt. The carrying amounts of such financial instruments approximate their respective
estimated fair value due to the short-term maturities and approximate market interest rates of these instruments. The
estimated fair value is not necessarily indicative of the amounts the Company would realize in a current market exchange or from
future earnings or cash flows.

26

Earnings
(Loss) Per Share

Earnings
(loss) per share are computed in accordance with ASC 260, "Earnings per Share". Basic earnings (loss) per share is computed
by dividing net income (loss), after deducting preferred stock dividends accumulated during the period, by the weighted-average
number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income
by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities,
if any, outstanding during the period. As of March 31, 2018, there were warrants and options to purchase 45,094,763 shares of
common stock and the Company’s outstanding convertible debt is convertible into approximately 163,957,118 shares of common
stock. These amounts are included in the computation of income per share because their impact is dilutive.

Accounting
for Stock-Based Compensation

The
Company accounts for stock awards issued to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees.
The measurement date is the earlier of (1) the date at which a commitment for performance by the counterparty to earn the equity
instruments is reached, or (2) the date at which the counterparty's performance is complete. Stock awards granted to non-employees
are valued at their respective measurement dates based on the trading price of the Company’s common stock and recognized
as expense during the period in which services are provided. For the three months ended March 31, 2018, and 2017, the Company
recorded stock- based compensation of $97,500 and $466,831, respectively (See Note 9).

Item 3.
Quantitative and Qualitative Disclosures about Market Risk

Not
applicable to smaller reporting companies.

Item
4. Evaluation of Disclosure Controls and Procedures

We
maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed
to ensure that information required to be disclosed in our filings under the Exchange Act is recorded, processed, summarized and
reported within the periods specified in the rules and forms of the SEC. This information is accumulated to allow our management
to make timely decisions regarding required disclosure. Our President, who serves as our principal executive officer and principal
financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by
this report and he determined that our disclosure controls and procedures were not effective as of March 31, 2018 due to a control
deficiency. During the period we did not have additional personnel to allow segregation of duties to ensure the completeness or
accuracy of our information. Due to the size and operations of the Company, we are unable to remediate this deficiency until we
acquire or merge with another company.

Changes
in Internal Control over Financial Reporting

There
were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation
required by paragraph (d) of Rule 13a-15 or 15d-15 of the Exchange Act that occurred during the quarter ended March 31, 2018,
that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial
reporting.

27

Part
II. Other Information

Item
1. Legal Proceedings

On
March 2, 2015, the Company, the Company’s CEO and the Company’s CFO at the time were named in a civil complaint filed
by Erick Rodriguez in the District Court in Clark County, Nevada (the “DCCC”). The complaint alleges that Mr. Rodriguez
never received 250,000 shares of Series B preferred stock that were initially approved by the Board of Directors in 2012, subject
to the completion of a merger of a company controlled by Mr. Rodriguez. Since the merger was never completed, the shares were
never certificated to Mr. Rodriguez. On March 21, 2017, the DCC agreed to Set Aside the Entry of Default against the Defendants.
Mr. Rodriguez resigned in June 2013. On April 12, 2018, an Arbitrator issued a final award to Rodriguez in the amount of
$399,291. The Company and the Company’s counsel believe the Arbitrator denied a number of detailed objections to the award,
which cited clear mistakes as to Nevada law and to the facts. The Company has retained a Nevada attorney who is an expert in fighting
attempts to convert arbitration awards into judgments in Nevada courts, to work with our arbitration counsel. The Company recorded
a loss on legal matter, included in other expenses for the year ended December 31, 2017. On May 3, 2018, the Arbitrator issued
an amended final award of $631,537, inclusive of interest and legal fees. The Company recorded a loss of $232,246 on the legal
matter, included in other expenses for the three months ended March 31, 2018.

On
May 6, 2016, the Company, B. Michael Freidman and Barry Hollander (former CFO) were named as defendants in a Summons/Complaint
filed by Justin Braune (the “Plaintiff”) in Palm Beach County Civil Court, Florida (the “PBCCC”). The
complaint alleges that Mr. Braune was entitled to shares of common stock of the Company. On December 5, 2016, the PBCCC set aside
a court default that had been previously issued. The defendants have answered the complaint, including the defenses that Mr. Braune
advised the Company’s transfer agent and the Company in his letter of resignation dated November 4, 2015, clearly stating
that he has relinquished all shares of common stock. The Company has filed a counterclaim suit against the Plaintiff, as well
as sanctions against the Plaintiff and their counsel.

Item
1A. Risk Factors

We
are a smaller reporting company as defined by Rule 12b-2 of the Securities Act of 1934 and are not required to provide the information
under this item.

Item
2. Unregistered Sales of Equity Securities and Use of Proceeds

During
the three months ended March 31, 2018, the Company issued the following shares of common stock upon the conversions of portions
of the convertible notes:

Date

Principal Conversion

Interest Conversion

Total Conversion

Conversion Price

Shares Issued

Issued to

2/12/18

$

69221

$

5,779

$

75,000

$

0.00564

13,297,872

St Georges

3/27/18

$

47,061

$

2,939

$

50,000

$

0.00564

8,865,248

St Georges

$

116,282

$

8,718

$

125,000

22,163,120

In
addition to the above, during the three months ended March 31, 2018, the Company:

On
February 26, 2018, the Company agreed to issue 5,000,000 shares of common stock to Dr. Stephen Holt, for his appointment to the
advisory board. The Company recorded an expense of $97,500 (based on the market price of
the Company’s common stock of $0.0195 per share) and is included in professional and consulting fees in the condensed consolidated
statements of operations for the three months ended March 31, 2018.

Issued
28,551,579 shares of common stock to St. George pursuant to Notices of Exercise of Warrant received. The shares were issued based
upon the cashless exercise provision of the warrant.

During
the three months ended March 31, 2018, the Company received $340,000, pursuant to Stock Purchase Agreements (the “SPA”)
with St. George to buy 15,515,543 shares of common stock.

28

Item
3. Defaults upon Senior Securities

None.

Item
4. Mine Safety Disclosures

Not
applicable.

Item
5. Other Information

Convertible
Debenture Proceeds

On
January 9, 2018, and March 20, 2018, St. George funded $200,000 and $75,000, respectively, of the secured promissory notes issued
to the Company, and the Company recorded $295,000 as convertible note payable, including $20,000 OID interest.

Item
6. Exhibits

Exhibit

Number

Description
of Exhibit

10.1

Form of Convertible
Promissory Note by and between Agritek Holdings, Inc. and Vis Vires Group, Inc. dated February 23, 2015. (Incorporated herein
by reference to Exhibit 10.1 as filed on Form 10-Q with the SEC on May 18, 2015).

10.2

Form of 8% Convertible
Redeemable Note by and between Agritek Holdings, Inc. and LG Capital Funding, LLC dated March 27, 2015. (Incorporated herein
by reference to Exhibit 10.1 as filed on Form 10-Q with the SEC on May 18, 2015).

10.3

Form of 8% Convertible
Redeemable Note by and between Agritek Holdings, Inc. and GW Holding Group, LLC dated March 30, 2015. (Incorporated herein
by reference to Exhibit 10.1 as filed on Form 10-Q with the SEC on May 18, 2015).

10.4+

Employment and Board
of Directors Agreement effective March 20, 2015 by and between Agritek Holdings, Inc. and Justin Braune (Incorporated herein
by reference to Exhibit 10.1 as filed on Form 8-K with the SEC on March 20, 2015).

10.5

Deed in Lieu of
Foreclosure Agreement dated December 16, 2015, by and among Agritek Holdings, Inc. and Tonaquint, Inc. (Incorporated herein
by reference to Exhibit 10.1 as filed on Form 8-K with the SEC on February 12, 2016).

10.6

Replacement Note
dated January 5, 2016, issued to LG Capital Funding, LLC. (Incorporated herein by reference to Exhibit 10.2 as filed on Form
8-K with the SEC on February 12, 2016).

10.7

Replacement Note
dated January 5, 2016, issued to LG Capital Funding, LLC. (Incorporated herein by reference to Exhibit 10.3 as filed on Form
8-K with the SEC on February 12, 2016).

10.8

Replacement Note
dated January 5, 2016, issued to Cerberus Finance Group, LTD (Incorporated herein by reference to Exhibit 10.4 as filed on
Form 8-K with the SEC on February 12, 2016).

10.9

Securities Purchase
Agreement dated January 19, 2016, by and between Agritek Holdings, Inc. and LG Capital Funding, LLC. (Incorporated herein
by reference to Exhibit 10.5 as filed on Form 8-K with the SEC on February 12, 2016).

10.10

Convertible Redeemable
Note dated January 19, 2016, by and between Agritek Holdings, Inc. and LG Capital Funding, LLC. (Incorporated herein by reference
to Exhibit 10.6 as filed on Form 8-K with the SEC on February 12, 2016).

10.11

Securities Purchase
Agreement dated January 19, 2016, by and between Agritek Holdings, Inc. and Cerberus Finance Group, LTD. (Incorporated herein
by reference to Exhibit 10.7 as filed on Form 8-K with the SEC on February 12, 2016).

10.12

Convertible Redeemable
Note dated January 19, 2016, by and between Agritek Holdings, Inc. and Cerberus Finance Group, LTD (Incorporated herein by
reference to Exhibit 10.8 as filed on Form 8-K with the SEC on February 12, 2016).

29

10.13

Securities Purchase
Agreement dated March 23, 2016, by and between Agritek Holdings, Inc. and Cerberus Finance Group, LTD. (Incorporated herein
by reference to Exhibit 10.13 as filed on Form 10-Q with the SEC on May 23, 2016).

10.14

Convertible Redeemable
Note dated March 23, 2016, by and between Agritek Holdings, Inc. and Cerberus Finance Group, LTD (Incorporated herein by reference
to Exhibit 10.14 as filed on Form 10-Q with the SEC on May 23, 2016).

10.15

Securities Purchase
Agreement dated December 13, 2016 by and between Agritek Holdings, Inc. and LG Capital Funding, LLC. (Incorporated herein
by reference to Exhibit 10.1 as filed on Form 8-K with the SEC on December 19, 2016).

10.16

Convertible Redeemable
Note dated December 13, 2016, by and between Agritek Holdings, Inc. and LG Capital Funding, LLC. (Incorporated herein by reference
to Exhibit 10.2 as filed on Form 8-K with the SEC on December 19, 2016).

10.17

Convertible Redeemable
Note Back End dated December 13, 2016, by and between Agritek Holdings, Inc. and LG Capital Funding, LLC. (Incorporated herein
by reference to Exhibit 10.3 as filed on Form 8-K with the SEC on December 19, 2016).

10.18

Collateralized
Secured Promissory Note dated December 13, 2016, by and between Agritek Holdings, Inc. and LG Capital Funding, LLC. (Incorporated
herein by reference to Exhibit 10.4 as filed on Form 8-K with the SEC on December 19, 2016).

10.19

Termination Agreement
dated December 13, 2016 by and between Agritek Holdings, Inc. and LG Capital Funding, LLC. (Incorporated herein by reference
to Exhibit 10.5 as filed on Form 8-K with the SEC on December 19, 2016).

10.20

Investor Note #1
dated October 31, 2016, by and between Agritek Holdings, Inc. and St. George Investments LLC. (Incorporated herein by reference
to Exhibit 10.6 as filed on Form 8-K with the SEC on December 19, 2016).

10.21

Warrant #2 dated
October 31, 2016, by and between Agritek Holdings, Inc. and St. George Investments LLC. (Incorporated herein by reference
to Exhibit 10.7 as filed on Form 8-K with the SEC on December 19, 2016).

10.22

Investments
LLC. (Incorporated herein by reference to Exhibit 10.7 as filed on Form 8-K with the SEC on December 19, 2016).

10.23

Securities Purchase
Agreement dated January 24, 2017 by and between Agritek Holdings, Inc. and LG Capital Funding, LLC. (Incorporated herein by
reference to Exhibit 10.1 as filed on Form 8-K with the SEC on January 31, 2017).

10.24

Convertible Redeemable
Note dated January 24, 2017, by and between Agritek Holdings, Inc. and LG Capital Funding, LLC. (Incorporated herein by reference
to Exhibit 10.2 as filed on Form 8-K with the SEC on January 31, 2017).

10.25

Convertible Redeemable
Note Back End dated January 24, 2017, by and between Agritek Holdings, Inc. and LG Capital Funding, LLC. (Incorporated herein
by reference to Exhibit 10.3 as filed on Form 8-K with the SEC on January 31, 2017).

10.26

Collateralized Secured
Promissory Note dated January 24, 2017, by and between Agritek Holdings, Inc. and LG Capital Funding, LLC. (Incorporated herein
by reference to Exhibit 10.4 as filed on Form 8-K with the SEC on January 31, 2017).

10.27

Securities Purchase
Agreement dated January 24, 2017 by and between Agritek Holdings, Inc. and Cerberus Finance Group LTD. (Incorporated herein
by reference to Exhibit 10.5 as filed on Form 8-K with the SEC on January 31, 2017).

10.28

Convertible Redeemable
Note dated January 24, 2017, by and between Agritek Holdings, Inc. and Cerberus Finance Group LTD. (Incorporated herein by
reference to Exhibit 10.6 as filed on Form 8-K with the SEC on January 31, 2017).

10.29

Convertible Redeemable
Note Back End dated January 24, 2017, by and between Agritek Holdings, Inc. and Cerberus Finance Group LTD. (Incorporated
herein by reference to Exhibit 10.7 as filed on Form 8-K with the SEC on January 31, 2017).

10.30

Collateralized Secured
Promissory Note dated January 24, 2017, by and between Agritek Holdings, Inc. and Cerberus Finance Group LTD. (Incorporated
herein by reference to Exhibit 10.8 as filed on Form 8-K with the SEC on January 31, 2017).

10.31

Securities Purchase
Agreement dated February 1, 2017 by and between Agritek Holdings, Inc. and Power Up Lending Group, LTD. (Incorporated herein
by reference to Exhibit 10.31 as filed on Form 10-K with the SEC on March 31, 2017).

30

10.32

Convertible Promissory
Note dated February 1, 2017, by and between Agritek Holdings, Inc. and Power Up Lending Group, LTD. (Incorporated herein by
reference to Exhibit 10.32 as filed on Form 10-K with the SEC on March 31, 2017).

10.33

Securities Purchase
Agreement dated February 24, 2017 by and between Agritek Holdings, Inc. and LG Capital Funding, LLC. (Incorporated herein
by reference to Exhibit 10.33 as filed on Form 10-K with the SEC on March 31, 2017).

10.34

Convertible Redeemable
Note dated February 24, 2017, by and between Agritek Holdings, Inc. and LG Capital Funding, LLC. (Incorporated herein
by reference to Exhibit 10.34 as filed on Form 10-K with the SEC on March 31, 2017).

10.35

Convertible Redeemable
Note Back End dated February 24, 2017, by and between Agritek Holdings, Inc. and LG Capital Funding, LLC. (Incorporated
herein by reference to Exhibit 10.35 as filed on Form 10-K with the SEC on March 31, 2017).

10.36

Collateralized Secured
Promissory Note dated February 24, 2017, by and between Agritek Holdings, Inc. and LG Capital Funding, LLC. (Incorporated
herein by reference to Exhibit 10.36 as filed on Form 10-K with the SEC on March 31, 2017).

10.37

Securities Purchase
Agreement dated February 24, 2017 by and between Agritek Holdings, Inc. and Cerberus Finance Group LTD. (Incorporated herein
by reference to Exhibit 10.37 as filed on Form 10-K with the SEC on March 31, 2017).

10.38

Convertible Redeemable
Note dated February 24, 2017, by and between Agritek Holdings, Inc. and Cerberus Finance Group LTD. (Incorporated herein
by reference to Exhibit 10.38 as filed on Form 10-K with the SEC on March 31, 2017).

10.39

Convertible Redeemable
Note Back End dated February 24, 2017, by and between Agritek Holdings, Inc. and Cerberus Finance Group LTD. (Incorporated
herein by reference to Exhibit 10.39 as filed on Form 10-K with the SEC on March 31, 2017).

10.40

Collateralized
Secured Promissory Note dated February 24, 2017, by and between Agritek Holdings, Inc. and Cerberus Finance Group LTD. (Incorporated
herein by reference to Exhibit 10.40 as filed on Form 10-K with the SEC on March 31, 2017).

10.41

Securities Purchase
Agreement dated March 24, 2017, by and between Agritek Holdings, Inc. and LG Capital Funding, LLC. (Incorporated herein
by reference to Exhibit 10.41 as filed on Form 10-K with the SEC on March 31, 2017).

10.42

Convertible Redeemable
Note dated March 24, 2017, by and between Agritek Holdings, Inc. and LG Capital Funding, LLC. (Incorporated
herein by reference to Exhibit 10.42 as filed on Form 10-K with the SEC on March 31, 2017).

10.43

Convertible Redeemable
Note Back End dated March 24, 2017, by and between Agritek Holdings, Inc. and LG Capital Funding, LLC. (Incorporated herein
by reference to Exhibit 10.43 as filed on Form 10-K with the SEC on March 31, 2017).

10.44

Collateralized Secured
Promissory Note dated March 24, 2017, by and between Agritek Holdings, Inc. and LG Capital Funding, LLC. (Incorporated herein
by reference to Exhibit 10.44 as filed on Form 10-K with the SEC on March 31, 2017).

10.45

Securities Purchase
Agreement dated April 24, 2017 by and between Agritek Holdings, Inc. and Cerberus Finance Group LTD.

10.46

10.47

Convertible
Redeemable Note dated April 24, 2017, by and between Agritek Holdings, Inc. and Cerberus Finance Group LTD. Convertible
Redeemable Note Back End dated April 24, 2017, by and between Agritek Holdings, Inc. and Cerberus Finance Group LTD.

Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.

2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the small business issuer as of, and for, the periods present in this report;

4. I am responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:

(a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating
to the small business issuer, including its consolidated subsidiaries, is made known
to me by others within those entities, particularly
during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the small business
issuer's internal control over financing reporting that occurred during the small business issuer's most recent fiscal quarter
(the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the small business issuer's internal control over financial reporting; and

5. I have disclosed, based on my most recent evaluation of
internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business
issuer's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses
in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the small
business issuer's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the small business issuer's internal control over financial reporting.

In connection with the accompanying Annual Report on Form
10-Q of Agritek Holdings, Inc., for the quarter ended March 31, 2018, I, B. Michael Friedman hereby certify pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:

1. The Report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents,
in all material respects, the financial condition and results of operations of the Company.